FocusChina’s ACN prices may drop slightly in July on ample supply

27 June 2013 05:28[Source: ICIS news]

SINGAPORE (ICIS)--China’s acrylonitrile (ACN) prices may drop slightly in July given ample supply and weak demand, market sources said on Thursday.

Although import spot cargoes will be limited in the country as imports have become more expensive, most domestic producers will run their plants normally in July after shutting them in June, a key trader said.

Supply in July will hence be ample as the increase in domestic supply is expected to offset the drop in import volume, while downstream demand remains weak, the key trader added.

ACN prices in China were at yuan (CNY) 12,600-12,700/tonne ($2,049-2,065/tonne) ex-tank east China on 26 June, according to Chemease, an ICIS service in China.

Prices of imported ACN cargoes were last assessed at $1,700-1,750/tonne CFR (cost & freight) NE (northeast) Asia in the week ended 21 June, inclusive of 17% of added-value tax and 3% of customs duty, according to ICIS data. With an exchange rate of CNY6.18 against the US dollar, the prices translate to CNY12,700-13,000/tonne. These are higher than those of domestic cargoes and hence, there is lower buying interest for imports.

Sinopec Anqing originally scheduled to carry out maintenance at its 130,000 tonne/year ACN plant in end-June or early July. However, the turnaround has been deferred to after July, a company source said.

Furthermore, some major producers such as Shanghai SECCO Petrochemical, Jilin Petrochemical, Fushun Petrochemical, Qilu Petrochemical and Shanghai Petrochemical will be running their ACN plants normally, and the average operating rate ACN plants in China is likely to be around 85%, market sources said.

According to the estimated data from Chemease, domestic supply may reach around 100,000 tonnes in July, a growth of about 17% compared with the volume in June.

While supply is expected to be ample, downstream demand continues to be weak.

According to Chemease data, demand from acrylonitrile-butadiene-styrene (ABS) market remains flat, and the average operating rate of ABS plants may be around 65%, while demand from the acrylic fibre (AF) sector increases slightly, with production rising to 80% capacity from 75%.

However, demand from acrylamide is expected to be down by 14% with the onset of lull season in July, and most acrylamide producers have reduced, or will be reducing, their plant operating rates.

Nonetheless, ACN prices may have little room for decrease. One key ACN producer said it will keep its prices stable as the current spot prices are not as high as before, and most ACN producers in China are facing squeezed margins given firm feedstock propylene prices.

End-users, on the other hand, remain cautious given the gloomy forecast in July.

“We will only buy on-demand because we have production cutbacks and ample supply,” an AM producer said, adding that the weak outlook of ACN prices also adds to its cautious stance.